Last year I decided to share with you details of my personal finances for 2019, and now I want to do the same for 2020. I find these summaries interesting to put together and figured I’d share my annual personal finances report again in case it helps anyone else out.
For many people this may seem like a weird and boring post, so feel free to skip it, but I’m sure there must be at least a few other people like myself who are nosey and find this kind of content interesting!
By now it’s barely worth saying that 2020 was an unusual year for obvious reasons. This caused some big changes to my personal plans, including ending up voluntarily taking the best part of five months out of work. Therefore I earned less than usual but also spent less because I wasn’t able to go anywhere!
TLDR: My bank balanced increased by £17,770.12 in 2020, despite earning less than this from my day job. Read on for more details.
Why I write these annual finance reports
I feel the need to spell out that I don’t share these to gloat, I don’t actually like sharing many details of myself online. Even so, I want to make it more acceptable to publically discuss personal finances with the intention to empower more people with financial freedom (post here).
One of the things I feel strongly about is improving our collective personal finance situation as a society. In the UK, personal savings are incredibly low, much lower than most other countries.
More than 16m people in the UK have savings of less than £100, a study by the Money Advice Service (MAS) has found.
BBC Article, September 2016
This means that many people are living month to month, right on the brink of poverty. There may be some people for which this situation is very difficult to escape from, for reasons outside of their control. But there are many others who I think could benefit from taking the effort to create at least a modest safety net.
Why do I care? A few example good outcomes:
- More financial security allows more job choices and empowerment to live how you want to live rather than having to stay in a job, housing situation or entire existence you don’t enjoy. See my post about financial freedom.
- It’s currently a faux-pa, here in the UK at least, to discuss your salary. More public discourse around wages could help identify wage inequality and facilitate holding academic departments and companies to account.
I want to illustrate that it’s often possible for pretty average people to save a lot more money than they imagine.
Previously I’ve mentioned my frustrations with housemates and friends who’ve told me that it’s impossible to save money, especially living in London. Well hopefully my report last year helped illustrate that it is possible, even as a PhD student renting in London.
Some notes about me
Some things which may be useful for context before we talk numbers:
- I’m now 31 (eek!) and have already built up savings over the last 6 or so years. Don’t wrongly assume I figured all of this out in my early 20s, though I wish I had done! These years of savings also mean I’ve starting feeling the power of compound interest: my savings working for me to create more income. I also want to make it clear that none of my savings originated from a windfall of any kind: no Bank of Mum & Dad here sadly!
- My goal is to live a sustainable life and create good in the world, even if this means forfeiting some returns. Therefore I try to avoid investing in the dodgiest companies (choosing ethical investments that do negative screening) and instead aim to use my money to do good in the world. I also don’t currently invest in crypto because of the (unnecessary) environmental footprint and don’t like the idea of rental property as an investment.
- I’ve rented since 2008, living all around the UK including almost four years in London (post about living costs in London) and as of 2020 didn’t own my own home. None of my income is from property, either in terms of increase in house value nor rental income: see the previous point!
- From April until the end of 2020 I was fortunate to live very cheaply at my partner’s parents house. This cut my outgoings, but over the same period I had very low income.
- I’m not a high earner. We’ll get into details shortly but the research assistant job I had at Imperial near the end of my PhD was the highest salary I’ve had and now as a postdoc at an out-of-London university I’m earning less with a PhD. Yes, really.
- I live a relatively normal life. I do like to life a thrifty lifestyle but in normal times I would go on several holidays (often abroad) a year, eat really well and proudly make monthly donations to support charities I care about.
The point I’m trying to make is that I’m not miraculous with my savings. I don’t run a successful company and instead earn a fairly average amount, but I am pretty careful about what I do with my money.
Sources of income in 2020
Day job
Jan-Feb: Imperial Research Assistant
Salary: £36,990
My original PhD funding was only for three years (rather than the typical 3.5 years) and ended in October 2019. Thankfully my PI was able to keep me employed as a research assistant until the end of February 2020 when I handed in my thesis. A perk was that Imperial employees are on a pretty decent salary compared to both PhD students and staff at other universities, so this was a nice boost compared to my previous PhD stipend income.
March-May: Imperial Casual Worker
Salary: N/A, £21.76/hour
I was a casual worker at Imperial for three months (though not full time), finishing off some papers for the project.
Over this period I also received payment for some GTA work I had done at the end of 2019 which is factored in to the above chart.
Other than that, I didn’t make any money over the summer: a conscious effort to get away from work considering I’d not been able to go abroad as planned. I’m very thankful to be in the position where I don’t need to work to live.
September-Dec: Bath Postdoc
Salary: £33,797
Towards the summer, I saw an interesting sounding postdoc position and decided to apply for it. I definitely would suggest casting a much wider net than applying for just one position if you’re desperate for a job!!
Somehow I was fortunate to get offered the position and started at Bath towards the end of September. The salary is lower than when I was a research assistant at Imperial (without a PhD to my name!) but I enjoy the work and have learned a lot. My take-home pay after taxes and pension contributions was £1951.96 per month.
Other income
If you added up all the income from the day jobs listed above, it comes to £14,556.04. How on earth did I end up saving £17,770.12?! Here are the main ways I increased my income:
- Lifetime ISA bonus
- Income from savings & investments
- Extra ways of making money
Lifetime ISA: 25% bonus (+£1000)
There is no better place to start saving for your first property deposit in the UK than using a Lifetime ISA. You can put up to £4000 a year in and get a 25% bonus from the government: an easy £1000 a year not including any interest payments you may get.
With a lifetime ISA you can either choose the cash or stocks & shares routes.
If you’re planning to buy over the next few years I’d definitely suggest choosing a cash lifetime ISA. It is simply too risky to put your house deposit onto the stock market.
I got my 2020-2021 bonus from a cash account (Skipton Building Society) but also held a stocks and shares one (AJ Bell) since I didn’t plan on buying a house for several years (not what happened!). This meant I could supercharge my savings by getting far higher returns on the stock market than just having it in a bank account.
I saw great returns in 2020 but I got lucky with timing for when I wanted to cash out in January 2021. I want to reiterate that if I’d known I’d be buying so soon I’d have kept to the cash lifetime ISA options! More on stocks and shares performance coming up next:
Investing & savings performance
In 2020 there were a few ways I made money with the savings I already have:
- Stock market
- Peer to peer lending
- Savings accounts
Stock market
I don’t know exactly how much I made on the stock market, but I know I did well!
The stock market can go down (as in March 2020) but over the long run historically has done well. I try to stay away from investing in individual companies and instead use funds which spread the risk over loads of different companies.
I also specifically choose ethical options so that I can sleep a bit better at night. The jury is out on whether returns are any worse or not by avoiding some companies but I simply don’t care: I would still choose to avoid them!
This post is already getting really long. Let me know if you’d like more details on what I invest in.
Peer to peer lending
In 2019 I lent out money through a lot of the main peer to peer platforms. Scared of an economic downturn I stopped reinvesting my returns in early 2020 (before COVID to be clear) and so over the year simply started withdrawing the returns I had made.
I still have a little bit of money in these accounts but I’m wary of investing any more. These platforms are unproven during economic turbulence and I’m still convinced we’ll see a lot more over the next few years.
Savings accounts
I regularly look around to see if there are bank accounts offering decent interest rates. Moneysavingexpert is the place to go and I read the weekly newsletters religiously. Often there are “linked savings accounts” where you open a current account with a bank and they let you put a certain amount per month into a savings account: typically £50-500 per month. These savings accounts often have interest rates of 3-5% making them worth opening for just a few minutes work.
Other ways of making money
I made a small amount of money throughout 2020 doing other things, as detailed in my monthly Beyond the PhD series.
One simple way that applies for most people is opening current accounts with banks which offer sign up bonuses and I made some money doing this in 2020. You can see here what offers are available right now.
The two main things that can be applied long term are
- Matched betting – full guide here
- Prolific surveys – review here
Returns from matched betting are way higher than Prolific, but I actually quite enjoy doing the Prolific surveys every so often and they’re simple to do.
2020 expenses
I won’t bore you with details of everything I spent money on in 2020. But here are the main two: food and rent. There are of course loads of other things I spent money on!
Rent
Jan-March London houseshare
When I was living in London I split the cost of a room in a houseshare with my partner. The room cost around £1070 per month excluding all bills. Looking back: Yikes!
For more details on living in London I have two posts which may be of interest:
- Sharing my monthly living expenses as a student in London: September 2019
- What is the cost of living in London as a student?
April-Dec sharing with partner’s family
Given that I couldn’t go abroad after my PhD, we quickly made a change of plans and moved in with my partner’s family. I’m very fortunate to have had the option of doing this, even if it was often not a very fun living arrangement. We paid £100 each per month for rent. Living cheaply did help me save money but I also wasn’t actually in a job for a good chunk of this time!
Food costs
I don’t keep good enough records to know exactly how much I spent in total throughout the year, but do know that every week I shared an Abel & Cole fruit and veg box* for £27.50 and spent about another £25-30 on other food. Totalling this up for the year would come to just under £1500 a year: about £4 a day. This sounds outrageous when I think of how well I eat: often getting 6, 7 or 8 portions of fruit and veg a day and very much enjoying my meals!
*If you’re interested in trying a veg box from Abel & Cole, here is an affiliate link to get £10 off your first (and third) boxes. Read my affiliate policy, I only promote companies I use and believe in: which doesn’t include places like Amazon!
This cost doesn’t include any meals out. I probably went for some in January to March but actually don’t think I went for a single one from April to the end of the year. This would be different if not for COVID.
For more in-depth posts about the cost of food, cooking and my tips for eating well on a budget see my series of posts on the topic:
- Part 1: Introduction to cooking delicious, nutritious meals on a budget
- Part 2: Eat well on a student budget: my guide to creating cheap, quick, healthy & tasty meals
- Part 3: My favourite cheap and healthy student meals on a budget
2020 Summary
I tally up all my accounts once a month and keep track of the changes on a spreadsheet. It probably makes me sound like Scrooge saying that but I promise I’m not! I actually find it really enjoyable seeing my savings increase!
Anyhow, here are the month by month increases:
In March my investments dropped in value so much that they wiped out all my returns and salary income from January and February! However they quickly recovered and in total for 2020 I ended the year with approx £18,000 more in my accounts than at the start of the year.
I try to avoid trying to time the stock market, as nobody can tell if it will go up or down. If I’d panicked and withdrawn the money in March I’ve have locked in the drop in value, whereas by leaving it alone it recovered (and much more quickly than I expected!).
Increasing my wealth by £18k in 2020 sounds pretty crazy to me when I didn’t work for a good portion of the year. I’d certainly have made well over £20,000 if I’d been in a steady job. But I’m pleased to have had time off over the summer and despite how egotistical and capitalist this post may seem, I’m not at all interested in making loads of money. I simply want to lead a modest lifestyle, and avoid getting trapped in a job simply for the salary so that instead I can spend my time doing things I care about: mostly helping other people!
Here are a few posts that explain my thinking:
- Financial freedom: Why saving money could help you find a career you love
- Beyond the PhD: my current and future plans
My top tips for creating wealth
- Cook more of your own meals from scratch. It is incredible how much a take-away habit can cost a year. I wrote a whole series of posts about eating healthy, quick and cheap meals. Please do still enjoy sociable meals with friends! Read my food series.
- Pay yourself first and start a saving habit. Set up a separate savings account, put some money into Premium Bonds or start investing. The easiest way is to set up a standing order to take a set amount of money out of your main account every month. Do it right after pay day and you’ll barely notice you had the money available.
- Interesting in owning your own home (in the UK)? Open a Lifetime ISA (LISA). LISAs are a great way to start saving for a house deposit. See the section above for more details. You can get up to £1000 a year for free. I bought my first home in February 2021 and by then my LISA accounts included around £5000 of these bonuses: very handy for my deposit!
- Give back. Creating wealth isn’t just about hoarding money. Use your money for good, both by investing in projects you care about (for example I’ve invested through Abundance and individual projects like NKCE) but also simply donating to causes you feel passionately about.
I have monthly direct debits to different charities and organisations I want to support. Yeah I could save more money by not donating this money, but it wouldn’t make any material difference to me and yet it could make a huge difference for others. This other post could convince you. If nothing else donating money will make you feel good!
- Don’t settle for abysmal interest rates at highstreet banks. I can see why it doesn’t look like it’s worth saving money when you’re getting 0.1% interest. Do keep an emergency fund in cash, but I suggest putting other spare money you don’t want to access for several years into:
- 1) A Lifetime ISA if you want to own a home in the UK, as described above you get a 25% bonus on what you put into it every year up to £4000.
- 2) Investing in the stock market. No, not trading or crypto currency but investing long term in actual companies and ideally ones doing some good in the world. I like to invest regularly (dollar cost averaging) and in diversified funds which takes away the risk of investing in individual companies. Over time the market as a whole has historically done well and I generally don’t favour my chances of picking individual winners.
- Start saving now. I didn’t add almost £18,000 to my bank balance in 2020 by simply saving all that money from my salary (which wouldn’t have added up!). A chunk of it was interest and dividends from savings I already had. Compound interest is a marvel. The sooner you start saving, the more the snowball can start building momentum.
My goals for 2021
It feels a little late in the year to be setting goals for 2021, not least because I already made a big life change earlier in 2021 and bought a house! I’ll admit that previously I was keen to save pretty heavily to ensure I could eventually buy a property.
Having successfully saved a house deposit, this year I want to continue to build funds for my financial freedom. This will take the pressure off needing a full-time day job and also build a fund to enable me to go travelling once this is feasible. I’m hoping to save around £1000 per month.
I plan to always live a frugal lifestyle since I enjoy it, especially for having a smaller ecological footprint, but balance it with spending money on things which bring me joy and do good in the world.
Do you find financial content like this interesting or not? Let me know!
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Nice info.
Thanks Brige. Best wishes. Jeff